The major Investment incentive laws in the Philippines to attract foreign investments are i) OMNIBUS INVESTMENTS CODE OF 1987 and ii) The Special Economic Zone Act of 1995
Philippines is one of the biggest countries in the South-East Asia region with a high developing economy. Annual GDP growth of Philippines stands strong at 6-7% over the last three years. According to analysts and experts, in the near future, Philippines will continue to be an outperformer compared to other countries in the region.
To sustain its high growth rate, the Philippines government has implemented a number of incentives schemes aimed at attracting and retaining foreign investments. The two main incentives schemes are governed under the Omnibus Investments Code (OIC) and the Special Economic Zone Act.
OMNIBUS INVESTMENTS CODE OF 1987 (OIC)
To enjoy investment incentives under the OIC, the foreign company needs to be registered with the Philippines Board of Investment (BOI).
A company is eligible to submit a registration to the BOI if it a) has less than 40% foreign ownership and b) invests in promoted activities listed in the Investment Project Plan (IPP) list.
This list is issued by the BOI and revised annually according to government policies. Some of the promoted activities in the list include agriculture, energy, infrastructure, logistics and export.
Under the OIC, there are various incentives for a company in Philippines in the form of tax exemption and reduction.
The company will enjoy up to 6 years of income tax holiday, depending on type of the project and whether it is located in remoted areas. The company will also enjoy tax exemption on imported spare parts, wharfage dues and export tax, duty and fees.
In addition, there are tax credits and deductions claimable on domestic breeding stocks and raw materials purchased and wages paid.
Under certain qualifying conditions, a company is also exempted from Value Added Tax (VAT). For example, VAT is waived for purchase of supplies of the firm is going to export 100% of its product.
Besides tax incentives, companies registered with the BOI also enjoy additional privileges.
For instance, a BOI registered company can employ foreign nationals in supervisory, technical and advisory positions. The company will also benefit from simplified import customs procedures and no restriction imposed on usage of consigned equipment. Furthermore, it is allowed to operate bonded manufacturing or trading warehouses.
Special Economic Zone Act
As the name suggests, a company might be able to enjoy benefits under this scheme if it operates within an economic zone, and is registered with the Philippines Economic Zone Authority (PEZA).
The investment priority areas under the current PEZA policies are export manufacturing, IT service export, tourism, agro-industrial export manufacturing, agro-industrial bio-fuel manufacturing, economic zone development, facilities and utilities.
A company registered under the PEZA enjoys all benefits provided under the OIC.
In addition, the company will also enjoy a reduced tax rate of 5% after the first 4 to 6 years of tax exemption. There is no tax for imports of raw materials, capital equipment, machineries and spare parts. Finally, the company can also claim tax credits for exports using local raw materials.
Over the past 10 years, Healy Consultants Group PLC has been helping entrepreneurs to efficiently set up their businesses in Philippines. If you are interested in investing in the country, do not hesitate to contact us and talk to one of our country experts at (+65) 6735 0120 or firstname.lastname@example.org.